Amazon, Macmillan, and the eBook Price War

By K. T. Bradford | Jan 30, 2010 09:12 PM EDT

Where do authors fit in to all of this? As I mentioned, eBook royalty rates may be different for eBooks than for print depending on what each author and publisher have negotiated. There’s some drama on this side of the battle as well, with some authors and agents wanting to keep royalties at 50%, especially for backlist titles that don’t require much financial layout on the publisher’s part. Random House and other large presses want to standardize royalty rates at 25%. Whether authors or publishers get what they want in this will also go a long way in determining eBook prices.

DAW author Jim C. Hines is happy with his eBook royalty split, which is the same percentage as his mass market paperback split. He hopes that prices stay under $10, though he’s not against higher costs for earlier access or extras included with the purchase to justify the higher price. In the end, he thinks the whole thing should be “cheap and easy” for consumers.

Tor author John Scalzi suggested tiered pricing on his blog, similar to the hardcover/trade/mass market paperback scheme that’s presumably along the lines of what Macmillan hopes to implement. “Would it work?” Scalzi asked. “Hell if I know. But that’s not to say it (or some other pricing scheme) is not in a publisher’s interest to try.”

Regardless of where they fall on the question of royalties or cover price, authors have been speaking out loudly against Amazon’s move against Macmillan. “I don’t necessarily agree with 100% of what Macmillan wants in terms of eBooks,” Hines told me. “But I think this is something that needs to be negotiated and sorted out, as opposed to Amazon declaring itself God of e-books and issuing proclamations from its mountain.”

Scalzi was even more blunt: “This asinine jockeying over electronic book prices has very little to do with what’s actually good or useful for anyone other than the manufacturer of a piece of hardware… who also happens to be a book retailer.”

It’s not yet clear if the winner in all this will be the consumers or not. That may depend on behind-the-scenes wrangling between Macmillan and other publishers and Amazon. However, you can bet that the likes of Barnes & Noble, Sony, and independent booksellers (both eBook and brick & mortar) are thinking of ways to take advantage of this schism.

I’m really surprised the hear that print costs amount to only 1% of retail price point. It seems like I hear all the time that publishers now don’t want books longer that 125000 words (and lately I’m hearing 90 – 100K0 especially from newer writers, in order the keep the retail cost of (in particular) hardbacks low.

Dear KT Bradford: Every other source I’ve checked the last couple days indicates that printing costs are TEN TIMES what you quote your source claiming – 10% of cover price, not one percent. At face value, your source is saying it costs A QUARTER to print most new hardcover books. Did this pass your smell test? Did you attempt to verify the claim? Or is this an uncorrected typo?

Right. 10% of the retail price is a significant amount! That’s 20% of the publisher’s take on a trade book at standard wholesaler discounts. And if you’ve previously followed the book business, you’ll know that you can’t get through a season without publishers complaining of “rising printing costs” and their dire effect on pricing.

The other thing none of your sources bring up is returns and never-sold stock. Together they average 40% of all copies printed. Together, manufacturing costs and returns reserve will run $6-9 dollars on a new hardcover, depending on where that book falls in the typical $25-30 price range. THAT is the size of the windfall when the business moves from paper to bits. What Macmillan and your friend Jeremy are implicitly saying is that NONE of that surplus value should go to readers; we should keep paying what we’ve been paying while the institutions upstream from us pocket the savings.

Retail price being different from sale price? There is no way that a 350 page hardcover book with it’s slick magazine cover can be produced for under two dollars. Even under four dollars sounds suspicious to me. paper, ink, binding and that slick cover. Even with cheap paper that yellows in six months it would have to cost four dollars. Then there are the other costs mentioned by previous posters.

The publishers could always sell the electronic books on their own Web sites in PDF form. $4.99 would be very profitable for them done that way. If people want the books at that price in that form then word will spread. If I were Amazon that is what I would be worried about, that Amazon would just become an advertiser to drive buyers to the publishers Web site for the E-book.

not completely true
there ARE costs to converting a real book to an ebook
so that it will be readable and usable in that medium

ebooks also have unique costs that real books do not

one big factor that is overlooked is all the middlemen with their
hands out wanting a percentage. if i gave a percentage to everybody
who asked then i would be paying 120% or more for the privilege of
publishing my books.

i pay fixed charges based on value. then i can guarantee a profit
so that i can afford to keep creating books, and authors will want
to keep writing them.